TechServe-Supported Independent Contractor Rule Reinstated

This article is an update to the March 16 report on a federal court ruling that restored a federal regulation that our association supported.

TechServe Alliance’s Wednesday, March 16 Industry Update reported on a federal court ruling that restored a federal regulation that our association supported.

On March 14, 2022, a federal judge in the Eastern District of Texas ruled that the Biden Administration violated the Administrative Procedures Act (APA) twice when it delayed the effective date, then withdrew the 2021 Department of Labor (DOL) Independent Contractor Final Rule.

Bloomberg Law, Business Groups Get Trump Administration Independent Contractor Rule Reinstated, March 15, 2022

TechServe Alliance is pleased with this ruling which is a victory on one of the association’s regulatory policy priorities. CEO Mark Roberts submitted comments to DOL on October 26, 2020 supporting the Proposed Rule and on April 12, 2021 opposing the delay or withdrawal of the Final Rule. (See May 7, 2021 Industry Update, below.)

Roberts stated, “TechServe supports the Final Rule which provides clarity to both IT and engineering independent contractor entrepreneurs and our members who want to hire them.”

The Court, in Coalition for Workforce Innovation, et al. vs Marty Walsh (Secretary of Labor), ruled that the delay and withdrawal actions as implemented were unlawful violations of the APA; accordingly, the Final Rule became effective on March 8, 2021 and is effective today.

The now-Final Rule focuses on two key factors – (1) nature and degree of control over the work; and (2) a worker’s opportunity for profit/loss. Previously, courts and government agencies used the common law seven-part economic reality test to determine employee/independent contractor status.

The TechServe Government Affairs Team will continue to monitor developments should DOL issue a new Notice of Proposed Rulemaking.

From TechServe Alliance Industry Update, May 7, 2021

Department of Labor Withdraws Final Rule on Definition of Independent Contractor

On May 5, 2021, the Department of Labor (DOL) announced the withdrawal of the January 7, 2021 Final Rule on the Fair Labor Standards Act (FLSA) definition of independent contractor. The withdrawal became effective on May 6, 2021 with this Federal Register publication.

DOL in its press release states that the “department is withdrawing the rule for several reasons, including: [t]he independent contractor rule was in tension with the FLSA’s text and purpose, as well as relevant judicial precedent; the rule’s prioritization of two “core factors” for determining employee status under the FLSA would have undermined the longstanding balancing approach of the economic realities test and court decisions requiring a review of the totality of the circumstances related to the employment relationship; and the rule would have narrowed the facts and considerations comprising the analysis of whether a worker is an employee or an independent contractor, resulting in workers losing FLSA protections.”

TechServe Alliance CEO Mark Roberts on April 12, 2021 and October 26, 2020 submitted comments supporting the previous Administration’s proposed independent contractor rule as it applied to the IT and engineering staffing industry. Roberts stated, “TechServe supports the pending Final Rule which provides clarity to both IT and engineering independent contractor entrepreneurs and our members who want to hire them. Should DOL withdraw the Final Rule, we urge DOL to engage the Small Business Administration and industries such as ours to develop workable, innovative solutions to this complex issue.”

The ability for high-tech entrepreneurs to continue to self-select independent contractor status is a TechServe Alliance Legislative and Regulatory priority. While the TechServe-supported IC Rule was withdrawn, our Team will continue to participate in legislative and regulatory efforts and follow litigation developments.

On March 26, 2021, a coalition filed a lawsuit against the Biden Administration for violating the Administrative Procedures Act regarding the steps taken to withdraw the IC Rule. That litigation is pending.